4 Tips to Lower Your Restaurant’s Labor Costs

4 Tips to Lower Your Restaurant’s Labor Costs

As a restaurant owner, you’re well aware of the cost of operations. From paying salaries to insurance, and maybe even franchise fees, there’s no end to the bills. One big area that takes a chunk out of your bottom line is labor costs. Labor costs, which mainly include salaries and hourly wages to employees, also include paid sick and vacation time, healthcare benefits, or retirement account contributions. When combined with food costs, some calculations put these expenses as at as much as 75% cost to sales. Controlling labor costs doesn’t mean you need to start sending your staff packing. Here, we’ll discuss 4 tips to lower your restaurant’s labor costs. It’s not as impossible as one might think!

Proper Payment

Many restaurant employees are paid on an hourly basis, working schedules with clearly defined start and end times. An easy course of action to take in an effort to cut down labor costs is to only pay your hourly staff beginning at the time they were scheduled to start working—not when they clock in. It may just be a matter of minutes you’re shaving off their timecard, but those minutes add up to real dollars.

Another idea that can be implemented is to initiate bonuses to mitigate call-outs and no-shows. Yes, this seems counterintuitive. But every time an employee calls out or doesn’t show up for a shift, you’re losing money by being incapable of serving (or serving well) as many customers as possible.

Get Attrition Under Control

It has been reported that attrition (aka turnover) in the restaurant sector is as high as 73%. Additionally, Cornell University’s Center for Hospitality Research puts attrition costs at nearly $6,000 per person when accounting for the costs of finding and training a replacement, among other things. How do you calm turnover, or prevent it from happening in the first place? Put more work into making sure the culture of your business fosters positivity, enthusiasm, and determination from your staff. Employees want to work in a place where they feel respected and trusted, and it’s your job as a restaurant owner to lay the groundwork for this to happen. Other ways to keep your employees coming back for more [work] is to offer opportunities for career advancement or introduce incentive programs (see above tip about bonuses). For more guidance on reducing restaurant turnover rates, check out our post here!

Cross Train Everyone

The more tasks your staff is able to perform, the better off you are as a business. Even if you’re a pro at keeping turnover to a minimum, there will inevitably be times when someone can’t show up for a shift. Prepare your employees to handle any staff shortage by ensuring they are able to cover whatever function is lacking. Bussers should also know how to wait tables; servers should be great behind the bar, too; and line cooks should also work the dish washer. And everyone should know how to close out a check. With proper cross training, you’ll be able to continue offering your customers top-notch service without missing a beat.

Age of Automation

Technology is taking over, especially in the restaurant industry. The advancements that’ve been made with tech have taken us far in the mission to reduce labor costs, making human intervention obsolete in some instances. Remember when you had to call a restaurant and speak to a hostess to make a dinner reservation? When is the last time you had to do that? Things like online reservation and ordering systems and table POS kiosks are changing the game, allowing you to staff less of the people who were once required before the Digital Age. We’ve written more about ways to transform your restaurant with technology in this post.

Labor is necessary to keep your business running smoothly, but it doesn’t have to be cost prohibitive. Try some of our tips to lower your labor costs, and don’t forget to let us know how they work out!